Question

The teacher (know) the boy was lying(correct tense)

Answer 1

the teacher knew the boy was lying
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Answer 2

The teacher knew that the boy was lying. There are different types of tenses.

You need to use the right form of the tense without which the meaning of the sentence would change and would also result in grammatical errors.

When the sentence is grammatically correct, then everyone will be able to understand it with ease.